Yahoo Finance Radius Recycling Inc (RDUS) Q2 2024 Earnings Call Transcript Highlights: Strategic Adjustments ...
Adjusted EBITDA: $3 million.
Adjusted EPS: Loss of $1.04.
Non-ferrous Volumes: Increased year-over-year in Q2.
SG&A Expense Reduction: 10% reduction planned.
Ferrous Average Selling Prices: Improved by 8% sequentially.
Ferrous Sales Volumes: Down 15% sequentially.
Non-ferrous Sales Volumes: Up 7% year-over-year, down 3% sequentially.
PGM Metal Prices: Down 7% sequentially, around 50% from a year ago.
Finished Steel Sales Volumes: 114,000 tons, up 5% year-over-year.
Operating Cash Outflow: $55 million in Q2.
Capital Expenditures: $15 million in Q2, projected $80 million for fiscal '24.
Net Debt: $360 million at the end of Q2.
Effective Tax Rate: Approximately 4% on reported pretax results, 8% on adjusted non-GAAP results.
Productivity Improvement Program: Additional $40 million plan announced.
Release Date: April 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Non-ferrous volumes increased year-over-year in Q2 due to strategic investments in advanced metal recovery technologies.
Achieved the full quarterly run rate associated with the $30 million productivity plan announced last October.
Expanded productivity plan by an additional $40 million through a 10% reduction of SG&A expense and further production cost efficiencies.
Positive contribution to performance from advanced non-ferrous recovery systems in the second quarter.
Finished steel products remained a significant contributor to consolidated performance in Q2, with sales volumes up 5% year-over-year.
Negative Points
Adjusted EBITDA of $3 million and an adjusted EPS loss of $1.04 in Q2, reflecting challenging market conditions.
High interest rates and low manufacturing activity are creating tighter supply flows and compressing metal spreads.
Continued inflationary pressures exacerbating the cyclical headwinds faced by the company.
Scrap supply flows remained tight during the quarter on lower economic activity, impacting the availability of raw materials.
Ferrous sales volumes were down 15% sequentially due to constrained supply flows and delays in certain bulk shipments.
Q & A Highlights
Q: If the recent market fundamental trends persist, do you feel there is room for additional reductions on top of the $70 million of reductions already introduced? A: Tamara L. Lundgren, CEO of Radius Recycling, indicated that the benefits of the recently implemented $40 million program have not yet been fully realized in the company's results. She mentioned that about half of the benefits are expected in Q3, with the remainder by the end of the calendar year. The company has a history of adjusting its platform as market conditions require, reflecting the nimbleness and resilience of their team and platform.
Q: Since exiting the February quarter, can you discuss any changes in ferrous recycling spreads and inbound scrap flows? A: Tamara L. Lundgren, CEO of Radius Recycling, noted that since the end of the quarter, prices in both the export and domestic markets weakened in March, which is atypical. Preliminary April reports indicate a stabilizing domestic market and a slightly improving export market.
Q: What have you seen as far as volume activity or demand activity on the export front since exiting the quarter? A: Tamara L. Lundgren, CEO of Radius Recycling, observed more steady selling off the East Coast into Turkey and that region, with the West Coast still a bit weak. Both markets are being impacted by elevated levels of Chinese exports.
Q: On the recent quarter, inventory holding gains were $2 per ton. Any anticipated change in holding gains or losses for 3Q? A: Stefano R. Gaggini, CFO of Radius Recycling, explained that inventory holding gains and losses are positive in a rising market environment and detrimental when prices decline. Based on the trends with domestic and export prices declining before stabilizing and slightly improving, there could be a sequential detriment to the third quarter.
Q: Are there any implications for the company from the Baltimore Bridge collapse and the earthquake in Taiwan? A: Tamara L. Lundgren, CEO of Radius Recycling, stated that neither event is expected to impact the company. She believes any rebuilding necessary in Taiwan will likely be met by their own domestic capacity.
Q: How is the company navigating the difficult market, especially on the West Coast? A: Tamara L. Lundgren, CEO of Radius Recycling, emphasized the company's focus on managing costs and efficiencies while being well-positioned to take advantage of positive structural tailwinds driven by EAF production growth, decarbonization trends, and the metal intensity of low-carbon technologies. She expressed confidence in the company's ability to benefit from market changes and infrastructure investment.
This article first appeared on GuruFocus.
